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The CFPB – The New Sheriff Starts Drawing Targets

The CFPB – The New Sheriff Starts Drawing Targets. What Tools Do they Have?. Supervision and Examination Civil Investigative Demand (CID) Administrative Enforcement Actions (Court). Supervision and Examination Results. American Express $85 million in refunds

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The CFPB – The New Sheriff Starts Drawing Targets

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  1. The CFPB – The New Sheriff Starts Drawing Targets

  2. What Tools Do they Have? • Supervision and Examination • Civil Investigative Demand (CID) • Administrative Enforcement Actions (Court)

  3. Supervision and Examination Results American Express • $85 million in refunds • $27.5 million in civil money penalties Discover Card • $200 million in refunds • $14 million in civil money penalties Capital One • $140 million in refunds • $25 million in civil money penalties

  4. Who Can They Supervise? • Financial Institutions • “Larger Market Participants” in financial services businesses (over $10 million in revenue) • Service Providers to financial institutions, regardless of size • But remember Noel Canning!

  5. Examination Step 1 – The letter comes • Exams are initiated by a notice of exam. • The notice will contain a list of documents that you will have to ship to the CFPB prior to the exam: • Policies and procedures • Org charts • Operating checklists • Management reports • (continued next slide)

  6. The letter - continued • Telephone recordings • Monitoring and QC reports • Compensation policies • Consumer files • Audit reports – internal and external • Training programs • Employee scripts • Written correspondence with consumers, including complaint responses • Court filings • Third party contracts • Etc.

  7. Examination Step 2 - Time Period for Gathering • 20-30 days! • Letter will come 60 days before onsite exam • Can request more time, but it is frowned upon

  8. Why all the docs? • CFPB is checking that you say what you do, and you do what you say. • They want to see that you actively monitor and audit your employees to ensure compliance with procedures. • They want to see that complaints are investigated and responded to.

  9. What laws are they examining in debt collection? • Fair Debt Collection Practices Act • Fair Credit Reporting Act • Gramm-Leach-Bliley Act • Electronic Funds transfer Act • Dodd-Frank “unfair, deceptive, or abusive acts or practices”

  10. Luckily, they have a script you can review • CBPB Exam Manuals: • http://www.consumerfinance.gov/guidance/supervision/manual/ • General (924 pages) • Debt Collection (29 pages) • Student Lending (27 pages)

  11. Debt Collection has Seven Modules • Entity Business Model • Communications in Connection with Debt Collection • Information Sharing, Privacy, and Interactions With Consumer Reporting Agencies • Consumer Complaints, Dispute Resolution, and Debt Validation • Payment Processing and Account Maintenance • Equal Credit Opportunity Act • Litigation Practices, Repossession, and Time-Barred Debt

  12. Examination Step 3 - Onsite Examination • Much like any audit – on steroids • CFPB says that it will handle minor infractions at the audit table – but enforcement attorneys will be there • Employees will be interviewed, procedures monitored and observed • Examinations have resulted in ultimatums on enforcement

  13. Examination Step 4 - Closing Up • Exit Interview • Final Examination Report • Hopefully not enforcement

  14. CIDs • Not in any respect collaborative – these are investigations of perceived violations and decidedly adversarial • They can easily be 20 -30 pages long • They contain a very cursory description of the perceived violation • They ask for every conceivable piece of documentary evidence • They can contain interrogatories and/or require oral testimony

  15. CID Step 1 – It Arrives • If you receive a CID, ACT FAST!! • Step 2 (meet and confer) arrives in a non-negotiable 10 days • Analyze what is being asked for and how hard it is to retrieve • Contact your lawyers and your IT people immediately • Be prepared to discuss in detail at the meet and confer any undue hardship presented by the CID

  16. CID Step 2 – Meet and Confer • CFPB says that this is a real opportunity to pare down a CID • Bring your IT people to the meeting, as theirs will be there • They don’t want the proverbial ten truckloads of documents • Differing reports of the meet and confer have been heard • It can depend on the CFPB enforcement attorney you’ve drawn

  17. Petition to Modify or Set Aside CID • Must be filed with the Director within 20 days following receipt of CID (10 days following meet and confer) • Must have met and conferred in good faith • Will likely result in investigation becoming public • Only one has been filed – In re PHH – It was denied • Company may have been hostile and uncooperative • Director Cordray’s order denying the petition contained a broad defense of the CFPB’s power to order production • The order also made clear that there must be a very good reason to object to a tight production schedule

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